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the dow breaks its winning streak. is the magic market ride over? in today's cover story, trouble aboard: is carnival cruise "in too deep" with its legal troubles to stay afloat? and, the motor city is not alone. the other u.s. cities that are struggling for a financial revival. plus, if it's too good to be true... it might be a ponzi scheme. the story of a man who duped investors out of a billion dollars. first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's monday, march 18th. i'm angela miles. in today's first look: the market pulled back after a 10-session-long magic rally came to a close friday. for the first friday of the year the dow fell, losing 25 points. the nasdaq and s&p also had mild
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losses, while gold and oil lifted slightly. sac capital will pay a record $600 million to settle an insider trading scandal. the hedge fund is accused of trading on non-public information of an alzheimer's drug. and is starbucks going politically correct? shareholders vote this week on a proposal that would stop the use of corporate funds for any political election or campaign. time now to check out the monday trade with ben lichtenstein of ben, always good to have you on this show. > > good morning. thank you. > i want to back up just a minute, though, to friday, and on friday alan greenspan was talking about the fact that he believes there is no irrational exuberance to stocks right now on cnbc. was that a buy signal, a sell signal, or no signal at
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all? > > i think it was a continuation of the existing buy signal for the most part. clearly this market has been establishing areas of value to the upside. one thing that traders need to be aware of is the fact that when a market moves from point a to point b, it doesn't go in a straight line, it pauses, and kind of regains strength if you will, or regains momentum, and those areas of pause are considered to be areas of value where the market trades sideways before it develops again vertically. in this case, it has been upside vertical development. anybody who is short this market is trading an opinion, not the market. the market clearly has been establishing areas of value to the upside, and until that changes, basically you are trading opinions. > what do you see in the week ahead? i know we have a fed meeting coming up. > > i think all eyes are going to be on the fed meeting for the most part. the most recent fomc minutes that were released really fueled this market right now. i'm talking about fuel for the dollar - we saw the dollar
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convincingly get above that 80- even level, and this last week, just recently, touched off the 83-even level. friday it sold off a little bit for the most part, off that 83-even level, but i also think, again, that this is just going to be more fuel for the fire, if you will. the fed has really come out with this very specific stance, it's a wealth effect-type stance, it's a very low- interest-rate environment, and i think that investors feel that the only real value right now, the only real place to put their money, is stocks; and clearly the perception of value is to the upside, otherwise we wouldn't have closed on highs on friday. > ben, have a great trading day. thank you. > > my pleasure. thank you. carnival cruise lines faces at least four lawsuits, inlcuding a class-action suit, after thousands of passengers were adrift for five days aboard a disabled carnival cruise ship last month. since then, three more carnival cruise ships have reported operational problems to either online systems or their backups, all of which coincides with carnival scaling back projected earnings. four incidents aboard carnival cruise ships in little more than a month led sandra thompson to cross carnival off her list for her next trip. "originally, i considered carnival because it was the
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least expensive; but after all this, i decided it's worth the extra money, and so royal carribbean is what i'm looking at now." carnival's troubles began february 10th, when fire aboard the triumph cruise ship left 4,000 passengers and crew adrift in the gulf of mexico for five days. since then, three other carnival ships, named 'elation,' 'dream' and 'legend,' have reported problems with steering, power or propulsion. "although i think carnival will spend more time fixing these issues, i don't think it's a sign that the ships are badly maintained." but repairs to the fire-damaged carnival triumph, which will miss 14 of its scheduled sailings, will cost the company and its shareholders. forecast earnings were cut even before the other incidents that followed. "i think in the near-term, investors should be concerned. carnival may respond with some sort of pricing. it will be a
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rocky road for the next three months or so for the stock." carnival's booking volumnes were beginning to recover from the negative publicity from the carnival-owned costa concordia, which ran aground in italy 14 months ago killing 32 people. now, little more than a year later, carnival faces lawsuits and additional costs of flying home 4300 stranded travelers from the dutch caribbean island of st. maarten, not to mention compensating them and passengers booked on ships about to leave on trips that were cancelled while the carnival dream is moored for repairs. friday, carnival corp. stock closed down slighty at $34.95. the stock has dropped 9.4% in the last three months. the former cio of jp morgan chase is passing on blame for
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the monster trade that caused the bank to lose more than $6 billion. at senate hearing friday, ina drew, who managed the london unit that lost the money in a whale-sized trade, told lawmerks she was undermined while working at the bank. "first, the company's new var model was flawed and significantly understated the real risks in the book that were reported to me; and second, some members of the london team failed to value positions properly." a jpmorgan spokesperson says management acted in good faith and never had any intent to mislead anyone. the hearings continue with other jp morgan execs. president obama is proposing a plan to fund clean-energy research. in a speech friday, the president laid out his plans, suggesting that the government draw $2 billion from royalties that the government receives for offshore drilling. researchers would attempt to find new ways to lower the cost
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of cars that run on alternative fuel sources. a closely watched case involving the drug industry will be heard by the supreme court tomorrow. generic drugmakers could soon make it harder for consumers to sue for a drug's side effects. under federal law, generic and brand name drugs are required to have the same warning label. now, generics are attempting to decrease liability over any harmful effects. generic companies say the industry is unable to change the product due to those federal standards. a hidden affordable care act fee is popping up for u.s. employers. the $63 fee will apply to plans covering millions of americans in 2014. it applies to employers who take on workers' medical bills and some private plans sold by insurers. the fee will be smaller in 2015 and 2016. meanwhile, the aca is projected to help 30 million uninsured americans. hedge fund manager carl ichan is pumping up his position in herbalife. according to reports, ichan recently purchased 2.3 million more
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shares of the stock, bringing his portfolio total to 16.4 million. ichan is said to be considering a number of options with the herbalife managment, such as a takeover. on the other side of the trade, hedge fund manager bill ackman had a short position in the stock while telling reporters he believes herbalife is a pyramid scheme that will send the stock to zero. boeing's dreamliner could soon be airborne - again. boeing is testing jets with a re-designed battery that safeguards against overheating. depending on approval from the faa, the jets could take off within weeks. in japan, aviation officials want further investigation. samsung is introducing more than just a new smartphone. the tech company has named two new co- ceos, bringing its total up to 3 chief excutive officers. with great fanfare last thursday, samsung unvieled its galaxy s- 4, which runs on google's android platform and is meant to do battle against apple with a 5-inch touch screen and technology that allows your eyes to move the screen. but, in
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the face of a downgrade and the new competition, apple shares rallied $1 friday. it's a busy week for ipos. kicking off the list, nursing facility aviv reit, a company that provides conference calls; west corporation; and on-demand digital ad management firm marin software. some biotechs are also set to launch ipos: enanta pharmaceuticals, tetraphase pharmaceuticals and lifesciences company model "n." it's a no-go for john paulson's move to puerto rico. rumors of a move popped up when paulson, a billionaire hedge fund manager, was reportedly looking at real estate opportunities on the island. a new law would eliminate taxes on gains from the $9.5 billion he has invested in his own hedge funds. his fund released a statement last friday that indicates he has no plans to permanently relocate. survey says... mark zuckerberg is a top ceo. zuckerberg topped
4:10 am's list of top ceos of 2013. ceos from sap, mckinsey & company, ernst & young and northwestern mutual rounded out the top five. meanwhile, tim cook slipped from the top spot last year to 18th. employees of the companies vote on their ceo, which means facebook employees really "like" their boss. ceo salaries are under scrutiny as recent filings reveal the earnings of the top brass. according to reports, john stumpf of wells fargo is the highest paid head of a major bank. on the heels of rising profits, his compensation package last year was nearly $23 million. in the automotive sector, ford ceo alan mulally took a pay cut but still made more than his peers at gm and chrysler with $21 million. and in a 25-year-long tradition, warren buffett still makes $100,000.
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time is running out to claim nearly a billion dollars in unclaimed tax refunds. the irs is sitting on the money left behind by close to a million americans who failed to file federal tax returns in 2009. april 15th is the deadline to file and claim the refund. still to come, from ponzi to prison: the inside scoup on how a florida lawyer fooled investors out of a billion dollars. but first, detroit isn't the only city facing a fiscal emergency. the other u.s. cities under pressure next with bill moller, after this "in the know" message.
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now we have the future and the fortunes of detroit, michigan,
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handed over to a bankruptcy lawyer. detroit may be in the worst shape financially, but plenty of other cities are in serious financial stress too. is detroit just the first domino to fall? let's talk with brian battle. he is the director of trading performance at trust capital partners. you are involved for 25+ years in looking at the bond market, municipal credits. let me ask you, is detroit unique here? > > unique is a word for it. what is wrong with detroit is two things: one, they had bad management, and that is not unique across the country. but what is wrong with detroit specifically is they have a declining population and declining assessed values. so, when you have less stuff to tax and fewer people, that means your government has to get smaller. so detroit, by not dealing with these problems, has made them worse. so the governor of michigan has appointed an emergency manager to take over and straighten things out. > let's look at the national picture. what do you see out there? are there some cities or counties that are on the bubble? > > there have been a couple of stories recently, and that's
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what makes it seem like a wave. we have harrisburg, pennsylvania, has defaulted, but that was because of an incinerator project that had gone wrong. we have jefferson county, alabama, which was a massive default, but that was mainly because the county is kind of being run as a criminal enterprise: there are people in jail, it's a total disaster. there are some towns and counties in the inland valley of california that are having some problems. so, it seems like there is a wave, but it just is a coincidental problem, because as the economy slows down, as long as the national recession lasts, it makes it harder and harder for municipal governments to balance their budget. > a lot of municipalities count on federal dollars that flow coming, and that is drying up too. so they are under stress. > > right. and that is why washington is important to everyone. it might seem like the sequestration is a problem in washington, but that money does come down to the states either through block grants or for transportation grants, and that money has to get squeezed out at the capital level, and it
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is going to be harder. the driver will be how long is the recession going to last, and how deep is it going to be? > if these cities you talked about and a couple of counties are basket cases, how are other cities that are having real stress problems dealing with it, because their big-budget item is what? employees. > > employees. right. so municipal government is a service enterprise, and when you have a service enterprise - police, fire, pave the roads, whatever it is - that implies employees, and when your labor expense gets too high, you need to cut back when times slow down, and we are starting to get that. local governments have been laying off a lot of people, but you need to right-size your government. for example, the state of illinois has a lot of revenue, but they need to deal with their pension problem. that is something illinois hasn't done yet. > brian battle. thanks so much. > > you're welcome. still ahead, a look at the network of institutions that are falling victim to ponzi schemes. the surprising story, next.
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just because bernie madoff is behind bars doesn't mean other ponzi action has slowed down. joining us via skype this morning is chuck malkus. he's author of "the ultimate ponzi: the scott rothstein story." good to have you on the show this morning. mr. rothstein was able to bilk $1.2 billion out of investors. how was he able to fool so many people? > > well angie, like most ponzi schemes, it is a matter of gaining trust first and then secondly creating a product, in this case a structured settlement, that he could sell, but unfortunately did not exist.
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> how lavish was his lifestyle? > > scott rothstein was someone who had three multimillion- dollar homes, a half dozen sports cars, including bugattis, and he was also someone who spent $60,000 a month on paid-for women - escorts. > what do you think was the most egregious thing that he did? you had an up-close view of what was happening. > > first of all he forged a federal judge signature to gain a $100-million-plus settlement in one case from a client. secondly, he hurt charities. he would give with other people's money millions of dollars to hospitals and also children's organizations, and then when it came crashing down, they all had to give the money back. > how were you able to get an up-close view? you wrote the book. where did you get your
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information from? > > first of all, his office was three blocks from my office; and secondly, because i am involved with charities here in south florida, i saw him time and time again at various events. at one event - it was actually the "philanthropist of the year" luncheon, attended by over 700 people - scott rothstein at the end of the event was named philanthropist of the year, and i just knew that the numbers didn't add up. > between this case and bernie madoff, why do you think it is that ponzi schemes are on the rise, according to you? > > i think ponzi schemes are on the rise because they promise unrealistic returns of anywhere from 15% to 40%, and there are still some people out there that, because maybe they know the pastor of the church or the rabbi at the synagogue, that they are going to go with this investment person because they are so close to the church or so close to charitable organizations. > mr. malkus, thanks so much for sharing your story. again, his name is chuck malkus. he's author of "the ultimate ponzi: the scott rothstein story." thank you. > > thank you. stay tuned. chart talk is next.
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a brain injury, get screened. americans suffer with a deadly disease. i was one of them. my disease was obesity and after consulting with my doctor, i received the effective treatment i needed. please join the obesity action coalition to acknowledge obesity as a disease visit obesity action dot org to sign an open letter pledging your support and for more information about how to talk to your doctor about weight loss and treatment options. together we can make a choice to end obesity now. a public service from the obesity action coalition.
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andrew keene, president of, joins us on this monday morning. hello andrew. let's take a look at a couple of trades you have on, starting with goodyear tire. what do you see in the charts with this one? > > i like this one. it has actually been moving up nicely in the last couple days, even on friday when the market looked a little bit weak, goodyear tire, gt, was higher. i flagged, there were calls being bought when the stock was trading $13.10. i looked at the chart, if i was to buy stock, i would have had a stop at around $12.50. i bought calls instead. i bought april $13 calls, which gives me the right but not obligation to buy stock at $13. the stock has moved up to $13.60. i think it can get up to $14 and then $14.50, but i always want to define my risk vs. reward, that is why i buy calls instead of stocks. > also ericsson is on your list.
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> > yeah. everybody knows i like stocks that go from the bottom left to the top right. i like stocks that are hitting on 52-week highs, i like to play the trend. there are a lot of things i like in ericsson. they have seen increased sales of equipment in china. china might be showing some weak pmis, but ericcson seems like they are doing all the right things. also they are looking to expand into poland, africa, also japan, so they are doing all the right things. the stock hit a 52-week high. then i saw unusual option activity. i saw a fund buying some july $13 calls, so once again, i played this through the call options. i bought july $13 calls for 80ยข. my break-even on this trade is $13.80. i think ericcson could get up to $15.50, which is the june 2011 high. > what do you think about apple rallying on friday as galaxy s- 4 was coming out? is that a good sign for the stock, or just a momentary blip? it has struggled, as you know. > > i think the next catalyst for apple to move is going to be earnings. right now it is kind of in this area, $419 is the high, maybe up to $460. so, a nice $40 range, just 10%. it looked very strong on thursday, when the galaxy 4 came out. if
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you think about it, the samsung phone might be a better phone. there might be better hardware on it, it might look cleaner, it might look crisper, but it doesn't have what apple has, which is the ecosystem. it doesn't have the ecosystem built in. so if i was to go out and buy a samsung phone, i might actually like the phone more, but it doesn't have the ecosystem built in. so, apple rallied on thursday and started looking very strong again on friday. i think it is kind of in a zone until earnings come out. we are going to have to see how their margins are. it's going to be a big one. also, how many units they have sold. so that is going to be the next catalyst. i am going to look to play flat it right here. > thank you andrew keene. have a good trading day. and that does it for now. coming up tomorrow, women in the workplace. why is it that women fall short of men at the office? from all of us at first business, thank you for watching.

First Business
KICU March 18, 2013 4:00am-4:30am PDT

News/Business. Angie Miles. (2013) New. (CC) (Stereo)

TOPIC FREQUENCY Scott Rothstein 4, U.s. 3, Boeing 2, Goodyear 2, Herbalife 2, Obesity Action Coalition 2, Apple 2, Ben 2, Andrew Keene 2, Bernie Madoff 2, Detroit 2, Ericsson 2, Samsung 2, Chuck Malkus 2, China 2, Michigan 2, Illinois 2, London 2, Washington 2, Tim Cook 1
Network KICU
Duration 00:30:00
Rating G
Scanned in San Francisco, CA, USA
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Tuner Channel 19 (153 MHz)
Video Codec mpeg2video
Audio Cocec ac3
Pixel width 704
Pixel height 480
Sponsor Internet Archive
Audio/Visual sound, color

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on 3/18/2013